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the measuring year and did not accelerate the accrual.
Section 461(d) merely addresses the question of acceleration
and does not focus on the amount of the deduction. It is just a
matter of chance that petitioner’s franchise tax liability has
increased each year so that the use of the prior year as the
measuring year results in a smaller deduction. Conversely, if a
taxpayer’s income decreased, it would have a larger deduction in
the reporting year. Section 461(d) simply addresses the question
of acceleration caused by the 1972 law. Therefore, for
petitioner’s 1989 tax year, it would use 1988 California income
as a base to arrive at $932,979 for Federal tax purposes.
Likewise, for petitioner’s 1990 tax year, it would use the 1989
income as the measure and be permitted to deduct $1,806,588,
which includes the $873,609 which petitioner has labeled as an
“excess” or “carryover”.
Finally, we note that the California franchise tax is
imposed on corporations for the privilege of doing business in
the State of California. Central Inv. Corp. v. Commissioner,
9 T.C. 128, 131 (1947), affd. per curiam 167 F.2d 1000 (9th Cir.
1948); see also Cal. Rev. & Tax. Code sec. 23151(a) (West 2004).
For years prior to the 1972 law, the tax was payable for the
“taxable year” as measured by the net income earned by the
corporate taxpayer during the preceding year, which is referred
to as the “income year”. Cal. Rev. & Tax. Code secs. 23041(a),
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